Securities Fraud—Jonathan Dwane Nelson

The former CFO of Patterson-UTI Energy has been indicted in federal court in Lubbock, Texas for wire fraud and willful certification of a false financial report to the SEC.^[1] Jonathan Dwane Nelson was named in a federal criminal complaint last month, and the day before the complaint was filed, the SEC filed a civil lawsuit against Mr. Nelson, accusing him of embezzling nearly $70 million from the corporation.^[2]

According to the indictment, Mr. Nelson filed the false certification in February, after having already embezzled roughly $50 million.^[3] He is also accused of ordering an assistant treasurer to wire $2.1 million to Aero-Space Reports, Inc.—a company owned and operated by Mr. Nelson—purportedly for a maintenance contract on a corporate aircraft; instead, the money was allegedly used to purchase a separate aircraft.^[4]

Finally, Mr. Nelson is accused of using a bogus invoice scheme to send money to companies he controls, then spending money on an airplane, an airfield, a ranch, homes, vehicles, and even a truck stop.^[5] Earlier this month, US District Judge Sam Cummings in Lubbock ordered the assets of companies tied to Mr. Nelson to be frozen.^[6] In all, 11 companies were named in the order.^[7]

Wire fraud is covered by 18 U.S.C. § 1343, which makes it a crime for a person to devise a scheme or artifice to defraud and then use the nation’s telecommunications infrastructure to carry out that fraud. The punishment for a violation of section 1343 is a fine, imprisonment for up to 20 years or both.

Willfully certifying a false financial report is covered by 18 U.S.C. § 1350(c)(2), which makes it a crime for a person to willfully certify any statement that fails to fully comply with the requirements of the Securities Exchange Act of 1934. The report must also contain information that fairly presents, in all material respects, the financial condition and results of operations of the company.^[8] The punishment for violating section 1350(c)(2) is a fine of up to $5 million, imprisonment for up to 20 years, or both.^[9]

In other news relating to Patterson-UTI, the J. Paul Getty Trust—which is related to the J. Paul Getty Museum—has named Mark S. Siegel to its Board of Trustees.^[10] Mr. Siegel is the chairman of the board of directors of Patterson-UTI.^[11] The J. Paul Getty Museum is, as we have discussed earlier, the subject of much international scrutiny for allegedly buying stolen artifacts from Italy and Greece. The trial against the Getty’s former curator, Marion True, began in Italy on Monday.^[12]

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[1] Betsy Blaney, Former CFO Indicted for Wire Fraud, Associated Press, Dec. 7, 2005.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Judge Freezes Assets of Companies Tied to Accused Former CFO, Tyler Morning Telegraph, Dec. 2, 2005.
[7] Id.
[8] 18 U.S.C. § 1350(b).
[9] Id. § 1350(c)(2).
[10] Press Release: The J. Paul Getty Trust Names Four New Appointments to Its Board of Trustees, Yahoo! Finance, Dec. 5, 2005.
[11] Id.
[12] Elisabetta Povoledo, Exhibited in Antiquities Case: The Cracks of a Broken Cup, NY Times, Dec. 5, 2005.